Residents
Owners
When it comes time to determine a property’s optimal rent, landlords have a tough decision to make. It’s been a predicament that any business owner faces at one time or another; determining the value of their goods or services offered.
It’s not possible to ever know what the perfect price would be but there are methods that people can use to determine the fairest price for all parties. Here is a look at how to go about setting your property’s rent.
Comparisons of Renting and Owning
A good way to start is by comparing how much the apartment would cost to make mortgage payments on it. Compare it to similarly sized properties and perhaps you can set the rent at what the price to own it would be. Rents have gone up as home prices have fallen because houses have become less desirable and renting has become more popular.
Pricing Strategy of Adding a Percentage
One of the most common methods is to simply add a percentage to the cost you have for the property. If an apartment costs $1,200 to maintain both short-term and long-term, add 25% to the figure and you’ll have a solid rental price. This apartment would be rented out for $1,500.
When a natural disaster or vacancy occurs, this pricing method won’t always be sufficient. If you want a return on your investment of 25%, you may have to increase that percentage to 30%, 35% or even 40% in case of unforeseen costs. Rising costs, vacancies and natural disasters can make the percentage method inefficient.
What are current market rates?
Another route to go on setting rent is to look at market rates. What are surrounding properties charging and setting rents at? Look at your competition and peers for pricing strategies for similar sized units. Keep in mind that different properties offer different features that can be charged more for.
For example, a furnished apartment or one with a washer and dryer may run higher than an empty unit with no laundry appliances. This is typically the best method for determining rent pricing.
Landlords should consider these methods when determining the price of rent in their rental property.
